Three Labour MPs and a Tory peer will be charged with false accounting in relation to their parliamentary expenses, it was announced today.

Keir Starmer, the director of public prosecutions, revealed that Elliot Morley, a former minister, David Chaytor, the MP for Bury North, Jim Devine, the MP for Livingston, and Lord Hanningfield, a former Conservative business spokesman, will be charged under the Theft Act.

Morley, Chaytor and Devine are Labour MPs; Hanningfield is a Conservative peer and was leader of Essex county council until he resigned this afternoon following the statement from the DPP. Starmer said the four would be charged with offences under section 17 of the Theft Act relating to false accounting.

Starmer said the four were being charged following a "careful and detailed" police investigation and that the CPS had reviewed the files carefully before deciding there was "sufficient evidence to bring criminal charges".

He said the CPS had decided not to prosecute the Labour peer Lord Clarke of Hampstead because there was "insufficient evidence to provide a realistic prospect of prosecution".

A sixth parliamentarian is still under investigation, Starmer said. He did not name the individual.

The announcement came at 11am, a day after the publication of a report showing that around half of MPs have been asked to repay a total of more than £1m to the Commons authorities because some of their previous claims were deemed improper.

The police launched an investigation into several MPs following the revelations about parliamentary expenses published by the Daily Telegraph last year. The Telegraph obtained a computer disc with full details of claims submitted by MPs, including information that the Commons authorities wanted to keep secret, and the publication of the Telegraph's findings unleashed a wave of anger about the way the system has been abused.

Morley, the MP for Scunthorpe, is being charged in relation to mortgage claims worth around £30,000.

Chaytor is being charged in relation to claims worth around £20,000. Devine is being charged in relation to claims worth around £8,000.

Hanningfield is being charged in relation to claims for overnight accommodation.

The four parliamentarians have been summoned to appear at Westminster magistrates courts on 11 March.

The maximum sentence for false accounting under the Theft Act is seven years in prison.

Morley, Chaytor and Devine issued a joint statement protesting about the CPS's decision and insisting that the issue should have been dealt with by the parliamentary authorities, not the criminal courts.

In their statement they said: "We are clearly extremely disappointed that the DPP has decided to instigate proceedings against us.

"We totally refute any charges that we have committed an offence and we will defend our position robustly. We are confident of our position and have been advised by eminent QCs.

"We maintain that this is an issue that should be resolved by the parliamentary commissioner who is there to enforce any breach of the rules. Clearly parliament's system of expenses is utterly discredited, but we believe there has been a complete inconsistency of approach to different individual cases."

There have been reports that the MPs may argue that any prosecution would be a breach of parliamentary privilege. In his statement Starmer said that this was an issue for the courts to resolve.

"Lawyers representing those who have been charged have raised with us the question of parliamentary privilege. We have considered that question and concluded that the applicability and extent of any parliamentary privilege claimed should be tested in court," Starmer said.

Following Starmer's announcement, Devine spoke out at his constituency home. He said: "I am absolutely astonished and devastated at the decision that has been taken today. Two new charges have been brought, both of which are easily explained and both of which I'll be explaining in court."

A Labour spokesman said: "The Labour party has already barred Elliot Morley, David Chaytor and Jim Devine from standing as Labour candidates at the next election. "We will not comment further while the legal process is ongoing."

After the CPS announcement, Hanningfield resigned as a Tory business affairs spokesman in the Lords. A party spokesman said he had had the Conservative whip suspended.

Hanningfield issued a statement saying he that he totally refuted the charges and that he would defend himself vigorously.

"All the claims I have ever made were made in good faith," Hanningfield said. "I have never claimed more in expenses than I have spent in the course of my duties."

Hanningfield resigned as leader of Essex council this afternoon, although he said he would continue to remain active in council work.

Visting Exeter for a regional meeting of the cabinet, Gordon Brown said he was "very angry" about the alleged abuse of parliamentary expenses.

"We have got to get rid of that old politics. It cannot be part of the new system. That's why I put forward proposals not just to reform the MPs' expenses system but to reform the way that parliament works and the link between parliament and the people of this country," Brown said.

A Labour spokesman claimed that the party had taken the "toughest action on expenses of any political party" because it had introduced a new expenses system.

But the Conservatives claimed that they had "led the way in dealing with the MPs' expenses scandal" because they were the only party to carry out an internal review of all their MPs' claims – leading to more than £250,000 being paid back.

Yesterday Sir Thomas Legg, the auditor who investigated all claims submitted by MPs, condemned the expenses system that used to operate as "deeply flawed". He said that the decisions taken by the Commons fees office "lacked legitimacy" and that many of them were mistaken.

After the Telegraph revelations, the government passed a bill with all-party support setting up an Independent Parliamentary Standards Authority (Ipsa) to take charge of the payment of MPs' expenses. Ipsa will operate a new system, based on recommendations in a report from the committee on standards in public life published last year.